First Time Homebuyer Tax Credit May Be Extended To All Homebuyers And Increased to $15,000 Through New Bill

The last few months have seen an increase in home sales to first time homebuyers, as well as a slight improvement in the real estate market as a whole.  A lot of people feel that this is largely due to the first time homebuyer tax credit that the Obama administration passed earlier this year. The measure, which was passed as a part of February’s stimulus package, gives first time homebuyers tax credits of up to $8000 when they buy their first home.  It certainly is an attractive offer if you’re looking for a home anyway – and we have several friends that have bought homes this summer because it was such a great deal.

A couple of weeks ago I wrote about how the time that was available to take advantage of the tax credit was quickly running out.  The credit is only applicable to home purchases that have been completed by December 1st, and since most home closings can take anywhere from 30-60 days,  if you haven’t already put in a purchase agreement on a house by now, you may be out of luck!

For a lot of people that is going to come as a big shock and a disappointment, but all hope is not gone!   Congress is already talking about extending the program, and possibly expanding it to all homeowners and increasing the credit to $15,000.  It is far from a done deal, but it is currently being debated by our legislators.

the National Association of Realtors wants to expand the tax credit to $15,000, and it wants to allow all buyers to be able to qualify, not just those who have been out of the market for three years, according to The New York Times. The $15,000 figure is actually the amount that the credit’s initial sponsor in Congress, Sen. Johnny Isakson, R-Ga., a former real estate agent, had wanted. Now Isakson is introducing a bill that would provide up to a $15,000 tax credit to any buyer who stays in their newly purchased home for a minimum of two years, according to the Times.

So Congress currently has bills that are being put forward that would extend the tax credit, increase it to $15,000 and allow all homebuyers (not just new homebuyers) to take advantage of the credit.  Whether this bill will pass is another matter.  It is currently up for debate, and the president is debating whether continuing it would be a good plan.

Asked about whether the Obama administration would consider extending the credit, White House spokesman Robert Gibbs said the administration’s economic team was evaluating the impact on new home sales and would make a recommendation to the president, according to the Associated Press.

The tax credit has been expensive, but it has arguably been successful in helping the ailing real estate and construction industries survive in recent months. However, like other supposedly temporary tax credits, the First-Time Homebuyer Tax Credit may end up being called the Perennial Homebuyer Tax Credit.

One of the biggest problems the bill faces is the price tag.  Estimates say that it could cost anywhere from $50 billion to $100 billion dollars.   Whether that is worth it right now is debatable.

Only time will tell if Washington will decide to continue the program.  If they do I can already hear all of the people complaining that they “only got $8,000”, or from others who want this credit to become permanent – not just a one-time deal.

UPDATE:  New First Time Homebuyer Tax Credit Bill Extension Introduced

A bill introduced last night after I wrote this post would now extend the tax credit for another 6 months, while not changing the the amount of the credit,  or who is qualified to receive the credit.  From

A senate bill introduced late Thursday would extend the $8,000 first-time homebuyer tax credit for six months after its current November 30 expiration date.

Maryland Democrat Sen. Benjamin Cardin introduced S.B. 1678, and it is co-sponsored by senators John Ensign (R-Nev.), Johnny Isakson (R-Ga.), Senate majority leader Harry Reid (D-Nev.) and Debbie Stabenow (D-Migh.)…

The bill would not change anything on the tax credit except its expiration date, although at least one housing industry group is calling for an expansion of the credit and another, the National Association of Realtors (NAR), has urged an extension of the tax credit.

So if this were to particular bill were to pass, the tax credit would be extended, but not increased or changed to include all homebuyers.

UPDATE:  11/5/2009

Bill passed by Senate and House to extend the $8000 tax credit. Now only needs to be signed by the president.  Extends the bill to include a $6500 current owner homebuyer tax credit.

What do you think?  Should the tax credit for homebuyers be increased to $15,000 and be expanded to all homebuyers?  Will the effect it has on our economy be worth it, or will it just be another over-reaching expenditure of taxpayer money?  Would you rather they just extend the current program? Let us know your thoughts in the comments!


Lawmakers Push For An Extension Of The $8000 First Time Homebuyers Tax Credit Into 2010 In Proposed Bill

Since earlier this year we’ve been talking a lot about the $8000 first time homebuyer tax credit that was passed as a part of the 2009 Economic Stimulus Package. The credit has been available for first time homebuyers since January 1st, and will continue to be available until November 30th. Now that the program is beginning to wind down, the rumblings about trying to get the program extended or modified have begun. A few months ago there was talk about the tax credit being increased to $15,000, but that never got off the ground.  Another bill that was introduced last month also never got out of committee.  So while there is interest in passing an extension, nothing has come to fruition yet.

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In order to create hundreds of thousands of badly needed jobs and move the economy to higher ground, the National Association of Home Builders (NAHB) today called on Congress to extend and expand the $8,000 first-time home buyer tax credit set to expire at the end of next month.

Testifying before the Senate Banking Committee, NAHB Chief Economist David Crowe warned that builders are reporting that business generated by entry-level buyers is already declining because it is now too late to complete a new home sale in time to take advantage of the tax credit.

To spur job growth, help reduce foreclosures and excess housing inventories and stabilize home values, NAHB is calling on Congress to extend the home buyer tax credit for an additional year through Nov. 30, 2010 and make it available to all purchasers of a principal residence.

The drop in business seen by home builders is real.  The number of building permits for new homes dropped significantly in September

Applications for home building permits, a gauge of future construction, fell in September by the largest amount in five months — a discouraging sign for the housing industry.

The decline, in part, reflected uncertainty about whether Congress will extend a tax credit for first-time homebuyers.

The applications for building permits fell 1.2 percent in September. That’s the biggest decline since a 2.5 percent drop in April and underscored worries that the fledgling housing revival could be derailed by rising unemployment, tighter bank lending standards and the expiration on Nov. 30 of the government’s $8,000 tax credit for first-time homebuyers.

Is The Tax Credit A Good Idea? Some Think It Won’t Make Much Of A Difference

Many in the building and real estate industries are clamoring for an extension of the credit, while others aren’t so sure that the cost of extending the program are worth it.

Housing Secretary Shaun Donovan said at a congressional hearing Tuesday that supporting the housing market “can be very expensive, especially at a time of significant budget deficits.”

The administration will make a recommendation on whether to extend the credit in the coming weeks, after studying data on tax filings from the Internal Revenue Service. While there would be some negative effects if it were allowed to expire, Donovan said, “I do not believe that a catastrophic decline would be the result.

Some analysts and lawmakers are skeptical about extending the credit, arguing that most homebuyers who receive it would have decided to buy anyway. And soaring unemployment is likely to dull the impact of any extension, Mark Vitner, a senior economist with Wells Fargo Securities, wrote in a note to clients.

“Many of the most likely buyers targeted have already taken advantage of the program,” he wrote.

The Newest Tax Credit Bill Piggybacks On Unemployment Benefits

So there is clearly division as to whether the program should be extended.    Other bills to extend the credit and increase the amount it gives to homebuyers have already died a slow death in committee never to again see the light of day.    This week Congress is once again considering another plan that would extend the credit through June of 2010.  Whether this new one will make it out of the committees remains to be seen.

The latest Senate proposal would drop the requirement that the credit be available only to first-time buyers, broadening the reach of the program but also adding to its cost, estimated by congressional analysts at $16.7 billion.

The backers of that idea, Sens. Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., chairman of the Senate’s banking committee, have suggested that their measure be attached to another pending bill aimed at throwing a lifeline to people hit by the recession, an extension of federal assistance to the millions in danger of exhausting unemployment insurance benefits.


The Isakson-Dodd proposal would extend the credit to June 30, 2010. It would also remove the first-time homebuyer requirement and raise the eligibility income limit to $150,000, or $300,000 for a couple. That’s double the current phase-out limits.

Provisions Of The New Proposed Homebuyer Tax Credit

So if this new bill that is piggybacking on an extension of unemployment benefits were passed, it would mean that the tax credit would be extended, and the new provisions would be:

  • You would not need to be a first time homebuyer – that provision would be removed.
  • It applies to homes purchased through June 30, 2010.
  • You must keep the home for three years.
  • The credit is refundable.
  • The credit is for $8,000 or 10% of the home’s value, whichever is less.
  • It phases out for incomes between $75,000 to $150,000 for single and $150,000 to $300,000 for couples.

So while it is still unsure as to whether this particular extension of the first time homebuyer tax credit will be passed, the momentum for an extension to be passed in some form is very real.  I would expect something to be passed at some point this  year.

UPDATE: A new bill has been “agreed to” by Senators, that would extend the credit and add a $6500 Tax Credit for current homeowners.  Details here.

What do you think?  Should the tax credit for homebuyers be expanded to all homebuyers, and extended until June of 2009?  Will the effect it has on our economy be worth it, or will it be just another large expenditure when we are already running huge deficits?  Let us know your thoughts in the comments!


5 Signs You’re Better Off Renting

We all know the benefits of buying a house to live in. Not only you can live in it, but also you can rent your house to produce monthly passive income.

Owning a house also has significant tax benefits as well as equity from appreciation. In brief, buying a home can be very rewarding.

However, homeownership isn’t for everyone. You might not be financially ready to own a home. You might not live in the house for too long.

As you’re making the rent vs buy decision, here are some signs you’re better off renting rather than buying a home.

If you are interested in comparing the best mortgage rates through LendingTree click here. It’s completely free.

Check out: 5 Signs You’re Not Ready to Buy a House

1. You don’t have sufficient time and money for home maintenance.

The home buying process itself and being a home owner is time consuming.

You’ll have to do a lot of research, which can take up a lot of your time. Hiring a real estate agent to look for properties can also take up your time.

Investigating which neighborhoods to live in, as does speaking with different mortgage lenders can soak up plenty of hours.

However, some service, like LendingTree, allows you to compare several mortgages at one time without wasting your time speaking with individuals lenders.

As far as being a homeowner, you can hire professionals to deal with home repair issues, but doing so costs money and still requires some of your time.

So, if you don’t have time and has no extra money to hire people, renting might make the most sense.

Related Resources

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2. You can’t deal with the problems associated with owning a home.

When you’re a tenant, you don’t fix anything in your building, except a few minor things in your apartment such as changing the light bulbs.

Even then, you can still call your landlord to fix the light bulbs. I have done it!

But when you’re a homeowner, you are responsible to fix any issues with the home such as a burst pipe, a leaky roof, etc…And like it or not, these problems do occur.

So if you don’t have the money to pay repairs, or if replacing a heating system or a roof causes you distress, renting might be the better option for you.

If you’re not sure whether you’re ready to buy a house, read the following article for more insights:

5 Signs You’re Not Ready To Buy A House

Feeling Overwhelmed With Your Finances?, You have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisor. SmartAsset’s free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.

3. You don’t have money for a down payment and closing costs.

Buying a house requires a lot of upfront costs. First, mortgage lenders require a down payment somewhere between 3 percent and 20 percent of the property’s purchase price.

On top of that, you will need anywhere between 2 percent and 4 percent of the home’s purchase price for closing costs.

You’ll also need money for inspections, title insurance, broker’s fees, etc.

Whereas, with renting , the upfront costs might include a rental application fee, which can range from $50 to $150 depending on your state.

A security deposit (let’s say $1400) and a first month rent (let’s say $1400). Any rent vs buy calculator you may use will tell you what makes more sense.

So if you cannot afford a down payment and related costs, such as closing, inspections, and other fees, it may make better financial sense to rent.

Click here to find out how much house you can afford.

4. You don’t have a stable job or a reliable income.

A job can be considered stable if you have held it for at least 2 years. If you have seasonal jobs lasting 3 to 6 months, or you have just started a new job, but not so sure how long you’re going to keep it, you may not want to consider buying a house.

Unless you’re buying a house with cold cash, you’ll need a mortgage loan for which you’ll make monthly mortgage payments.

If you don’t have a stable job with regular paychecks, you might not be able to keep up with your monthly mortgage payments.

On top of that, you’ll also need extra money to pay for utilities, maintenance, repairs, property tax, homeowner insurance.

5. You might move out of state.

Do you intend to live in your home for at least 5 years? If the answer is no, then you’re better off renting.

If you’re not sure how long you’re going to be in a particular area (city or state), because of work or family, etc, renting might the best option for you.

Selling a house is much harder than getting out of a lease. If you’re getting out of lease, the worst thing that can happen is that you pay a few thousands bucks.

But with a home, not only does it takes a long time to sell it, but also you’re likely to lose money when you do sell it.

The reason behind it this: the longer you stay in your house the more time you have to offset all of these closing costs and fees.

If you sell within a few years, your home might not have appreciated enough to offset these fees.

Click here to compare mortgage rates through LendingTree. It’s completely FREE.

Bottom line…

Of course, there are several benefits of owning your own home. Your home may build equity. There are good tax benefits, etc. However owning a home isn’t for everyone.

You might need to move to another state. You may not have a reliable income.

So before you’re thinking of buying a house weigh the rent vs. buy options to determine which is right for you.

More article on buying a house:

10 First Time Homebuyer Mistakes You Must Avoid

What Is A Typical Down Payment On A House

Shop For A House: Steps To Buying A House

Working With The Right Financial Advisor

You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

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First Time Homebuyer? 6 Home Buying Myths to Look Out For – Redfin

Buying your first home is often a dream for many renters out there. But with all the information about how to buy a home, it can be easy to believe some of the home buying myths. Whether you’re looking to buy a house in Seattle, WA, or a condo in Miami, FL, you’ve probably heard some of the myths surrounding how much you’ll need for a down payment or how high your credit score should be. 

Before you set your sights on your dream home, make sure you know just what separates the home buying myths from the facts. You may realize that you’re able to buy your first home sooner than you think.



MYTH 1: You need a 20% down payment

The biggest home buying myth for any first time homebuyer is that you need a 20% down payment to buy a home. In many cases, your down payment can be as low as 3.5%. Common types of loans with low to no down payments include FHA, VA, and USDA loans. With FHA loans – loans designed for individuals with a low-to-moderate income level and credit score- your down payment could be as low as 3.5%. For veterans and current service members, VA loans offer no down payment mortgages, and those looking to buy a home in a rural area may qualify for a no down payment USDA loan. 

Aside from loans, down payment assistance programs can help you lower the cost of your down payment. These programs are available nationwide, statewide, or locally in your county or even city. Down payment assistance programs provide a wide range of assistance types such as second mortgages, forgivable loans, or grants covering partial to full costs of your down payment. Your real estate agent or mortgage lender can help you determine what down payment assistance you qualify for. 

If you do have the means to purchase a home with a 20% down payment, there are benefits to consider. For starters, you won’t need to factor in private mortgage insurance (PMI) to your budget. PMI is an additional cost your mortgage lender may require if your down payment is below 20% and the cost is factored into your monthly mortgage payment. However, it’s always a good idea to talk with your financial advisor or wealth manager to determine your finances and whether a 20% down payment is the right option.

MYTH 2: Renting is cheaper than buying a home

One of the most common home buying myths is that renting is cheaper than buying a home. If you’re deciding whether to make the transition from renter to buyer, you might believe that renting is the less expensive option. However, in some cities the cost of renting a home may be less than or equal to a monthly mortgage payment.

If you’re serious about buying a home, you may end up saving money in the long run if you buy a house rather than continue renting. To compare the costs of renting versus buying a home, you can use a rent vs buy calculator to determine which option works best for your circumstances.

MYTH 3: Your credit score needs to be perfect

Home buying myths centered around credit scores often run rampant, specifically the myth that you must have a great credit score to buy a home. Luckily, that’s not always the case. If your credit score is at least 580, you may qualify for a 3.5% down payment FHA loan. For those looking at USDA loans, your credit score should also be a minimum of 580. VA loans actually have no minimum credit score, but instead require lenders to look at the whole loan profile of a homebuyer.

Generally speaking, if your credit score is higher you’ll likely have more options when it comes to qualifying for a conventional loan. With a higher credit score, you may also find that the terms of your loan or interest rates are better. However, just because your credit score isn’t great doesn’t mean your homeownership dreams need to come to a halt.

MYTH 4: All mortgage lenders offer the same rate

First time home buyers may have the belief that every mortgage lender will offer you the same rate no matter where you go. When shopping for a mortgage, it’s always a good idea to get more than one quote. Not every mortgage lender will offer you the same – or even the best- loan terms. To avoid making this mistake, it’s important to get quotes from several mortgage lenders and find the one that’s best suited for your finances and homeownership goals. 

MYTH 5: Home inspections are optional

Especially if there are bidding wars, it can be tempting to skip a home inspection to make your offer stand out. However, home buying myths like these may cause more issues down the road. More often than not, mortgage lenders will require a home inspection before you buy the home, so you may not even have the chance to consider passing on a home inspection.

In the case that your lender does not require an inspection, this doesn’t mean you should skip it. It’s important to know the condition of the home you’re looking to buy. That way you’ll be aware of any damage or issues the house may have before becoming the owner. If a home inspection does find any significant damage, you may be able to negotiate with the seller to repair the issues or lower your asking price. 

MYTH 6: The listing price is non-negotiable

A home buying myth that some first time homebuyers believe is that the listing price is set in stone. Depending on the housing market, you may need to be prepared to spend more than the home’s list price or negotiate for a lower price. If you’re buying in a seller’s market– where there are more buyers than homes available- you should be prepared to make an offer that’s higher than the listing price.

If it’s a buyer’s market- where there are more homes available than buyers looking to purchase- you may be able to negotiate for a lower price than what’s listed. Either way, believing the home buying myths about listing prices may cause you to lose out or even overspend on the home of your dreams.


It’s still really difficult to get a mortgage, but getting easier

Mortgage credit is still the tightest it has been in more than six years, but steady loosening in January revealed lenders are preparing for a rebounding economy, the Mortgage Bankers Association said in a report on Tuesday.

The group’s Mortgage Credit Availability Index rose 2% to 124.6 last month, still hovering near levels previously seen in 2014, though it is the third month in the past four that credit availability has picked up as supply eases out. The index plunged from record highs seen in late 2019 after the COVID-19 pandemic caused the worst economic contraction since the Great Depression.

Measuring credit availability by loan type, the Conforming MCAI that tracks loans backed by Fannie Mae and Freddie Mac rose 7.7% while the Jumbo MCAI measuring high-balance loans rose 2.2%, and the Conventional MCAI that measures loans not backed by the government rose 4.8%.

The Government MCAI that includes mortgages backed by the Federal Housing Administration, the Veterans Administration and the U.S. Department of Agriculture fell by .1%, MBA said.

A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit.

What happens when borrowers have more control of the lending process?

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According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, an uptick in credit availability coincides with a housing market that is poised for a strong start to the year.

“Improvements were driven by the conventional segment of the mortgage market, as lenders added ARM loans with lower credit score and higher LTV requirements,” Kan said.

Despite ARM loans accounting for a very small share of loan applications in recent months, Kan noted lenders are likely looking ahead to a strong home buying season by expanding their product offerings.

And even with tighter standards throughout the pandemic, the lowest mortgage rates on record still pushed $4 trillion in originations, insane year-over-year compensation for LO’s and opened the gate for several lenders to finally go public in 2020.

Fannie Mae’s economic and strategic group also upgraded its 2021 forecast in January setting expectations higher for GDP, increased home sale growth in the beginning of the year and even more purchase originations than the year prior.

“Ongoing strength in home-purchase applications and home sales continue to signal robust housing demand, even as low housing inventory remains a constraint,” Kan said.